Savings warning issued as interest rates ‘don’t pay’ | Personal Finance | Finance

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Interest rates have increased substantially in recent months with high street banks and building societies passing on this hike to savers. However, with inflation continuing to be extremely high, returns are being significantly diminished despite the base rate being at four percent. In light of this, experts are encouraging people to explore other money making endeavours, namely trading and investing.

Money expert John Lee from The John Lee Group broke down how people can take advantage of a potential economic downturn.

Speaking exclusively to, he explained: “I don’t advise people to save money in banks these times, saving money doesn’t really pay even if you get five percent.

“I’d say what people should be doing is trying to reduce spending and investing in themselves to produce a higher ROI (return on investment) so for example training to trade and buy goods.

“If I can buy goods for £100 and flip them for £200 I’ve made a 100 percent return.

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“That’s way more money than if I put my money in the bank, so it’s looking for under- priced assets, which is a recession effect anyway.”

Multiple experts do warn of the dangers posed by families not having an emergency fund to fall back on.

As it stands, the latest rate for Consumer Price Index (CPI) rate in inflation came to 10.5 percent which has resulted in the cost of goods and services skyrocketing.

In response, the central bank has made the decision to hike the base rate, causing interest rates on savings products, debt repayments and mortgages to go up also.


Even with interest rates continuing to rise, and a potential further base rate hike from the Bank of England, in the future, existing products from banks, building societies and lenders are unable to compete directly with inflation.

With miniscule returns, investing is increasingly being considered as a viable option for individuals looking to boost their savings pot.

Colleen McHugh, the chief investment officer (CIO) at Wealthify, spoke with about the importance of investors being aware of interest rates interacting with savings before coming to a conclusion.

Ms McHugh added: “The key thing to consider here, however, is how the interest rate relates to inflation.

READ MORE: Recession fears continue despite UK economy growing

“Inflation rates remain in the double digits and, when the interest rate on your cash savings is below inflation, your money will lose value over time.

“Over the long term, the risk of keeping your money in cash savings accounts – even with interest rates high – could therefore be bigger than investing.”

The finance expert shared some suggestions for those who want to seriously start making investments part of their money management routine.

She said: “That said, you should balance the need for short-term cash with long-term growth. It’s generally advised to have at least three months of outgoings before you begin investing, after which it becomes about making sure your money is working hard — something investment services like Wealthify can help you with.

“When it comes to portfolio management, cash is considered a legitimate asset class in portfolios for many reasons including preservation of capital, providing liquidity and offering diversification benefits.

“However, the real benefit of having a cash allocation in an investment portfolio is its optionality; the ability to make quick decisions and adjust investment strategies in response to changing market dynamics being a powerful concept.

“Whilst having a cash position is hugely beneficial in the broader sense, the key is to regularly review the allocation in light of market conditions and your investment goals.”

The next interest rate announcement by the Bank of England will take place on March 23, 2023.

Author: Dhanraj7978

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